Ask The Experts: Money Matters

By Mike Miles

Are 401(k) and catch-up contributions earned income?

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Q. I plan to retire next year with 35 years of federal service (FERS) at age 56, and eligible to receive a Thrift Savings Plan supplement of about $18,000 per year.

Once I retire, I plan to work to earn approximately $38,000 per year. Of the earned income, I plan to contribute $17,500 to my 401(k) plan and an additional $5,500 toward the catch-up contribution. The remaining $15,000 will be reported as an earned income on my W-2 and Form 1040.

I plan to earn $38,000 for the year, so that my supplemental income will not be deducted $1 from my TSP supplemental benefit payments for every $2 I earned above the annual limit of 15,120.

Are the 401(k) and the catch-up contribution considered earned income that could reduce the $18,000 TSP supplement per year?

A. You’re talking about the FERS special retirement supplement, not a TSP supplement. Earnings you direct into a 401(k) plan are still considered earnings for the FERS Supplement Earnings Test.

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